DUSHYANTSINGH Y CHUDASAMA,VADODARA vs. INCOME TAX OFFICER, WARD-1(2)(4), VADODARA

Aggrieved with the order of the AO, the assessee had filed an appeal before the First Appellate Authority, which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was dismissed.

Now, the assessee is in second appeal before us. The following grounds have been taken by the assessee in this appeal:

On the facts and circumstances of the case, Hon'able CIT(A) has erred both on facts and in law in upholding the reassessment order passed by the Id.AO where the reopening of the assessment itself was without juri iction, bad in law and liable to be quashed for the reason that no addition was made in reassessment order for which case was reopened.

On the facts and circumstances of the case, Hon'able CIT(A) erred in confirming the addition of Rs. 23,87,500/- on account of opening cash balance which pertains to earlier year i.e. A.Y.2009-10. 4. On the facts and circumstances of the case and in law, Hon'able CIT(A) erred in confirming the addition of Rs. 12,39,937/ made by ld.AO on presuming share of the appellant @50% instead of actual share @ 25%.

On the facts and circumstances of the case and in law, Hon'able CIT(A) erred in confirming the disallowance of claim of loss of Rs. 12,04,869/- resulted due to claim of interest expenses of Rs. 12,07,500/- in relation to funds borrowed for investment in firm which deserved to be allowed u/s 57 of the Act against interest income and set off u/s 71 against other income.

The appellant craves a leave to add, alter, amend, delete or withdraw any ground/s of appeal on or before hearing of the appeal.”

The first ground taken by the assessee is general in nature and no argument was advanced by the assessee in this regard. Hence, dismissed.

The second ground is against the reopening of the assessment u/s.147 of the Act. This ground was also not pressed by the Ld. AR in the course of hearing, hence, the same is dismissed.

The next ground pertains to addition of Rs.23,87,500/- on account of opening cash balance. In the course of assessment, the AO had noticed that the assessee had introduced fresh capital in partnership firm M/s. Rudra Construction, deposited cash in his bank account with State Bank of India and Bank of India and also made investment in cash for purchase of agricultural land. The assessee was, therefore, required to explain the source of these investments and deposits. Initially, the assessee had explained that certain funds were borrowed from relatives for making investment in M/s. Rudra Construction. Subsequently, a plea was taken that the capital introduced in M/s. Rudra Construction was out of amount withdrawn from personal savings account. From the cash flow statement submitted by the assessee, the AO noticed that the assessee had shown obtaining cash balance of Rs.23,87,500/-. However, no supporting evidence in respect of this opening cash balance of Rs.23,87,500/- was furnished and, therefore, the same was treated as income from undisclosed source by the AO and added to the income.

1 Shri A. R. Khandelwal, Ld. AR of the assessee explained that the opening cash balance was duly supported by the balance sheet of earlier years and, therefore, the AO was not correct in treating the same as unexplained. He explained that the assessee was deriving regular income from partnership firm. Therefore, the AO was not correct in treating the entire cash balance of Rs.23,87,500/- as unexplained.

2 Per Contra, Shri Rignesh Das, Ld. Sr. DR supported the orders of the AO & the CIT(A).

3 We have considered the rival submissions. In the course of assessment, the AO had submitted the following summary of the details of investments made by the assessee during the year along with the explanation for the source thereof:

4 It is, thus, found that the total investment of Rs.91,65,687/- made during the year was partly explained out of opening balance of Rs.23,87,500/-. However, no evidence was produced by the assessee in respect of this opening cash balance of Rs.

The next ground pertains to addition of Rs.12,39,937/- on account of investment in immovable property. In the course of ITA No. 530/Ahd/2024 [Dushyantsingh Y Chudasama vs. ITO] A.Y. 2010-11 - 6 –

1 The Ld. AR of the assessee explained that the share of the assessee in the said property was to the extent of Rs.25% only. Therefore, the addition made by the AO was not correct. He further submitted that the confirmation of the co-owner of the property was also filed in this regard.

2 Per contra, the Ld. SR. DR submitted that the share of property of the two co-owners was nowhere specified in the sale deed and, therefore, the AO had rightly taken the share of two co-owners at 50% each. He further submitted that the contention of the assessee that his share was 25% only was rightly rejected as no such shareholding was specified in the sale deed. The Ld. Sr. DR further submitted that the evidence in respect of 25% share in the property filed by the assessee in the course of assessment was a self-serving evidence and was rightly rejected by the AO.

3 We have carefully considered the rival submissions. The copy of the sale deed dated 26.11.2009 has been brought on record. It is found that the specific shareholding of the two buyers was nowhere specified in the sale deed. Under the circumstances, the AO had rightly taken the shareholding of the two buyers at 50% each. Further, it is also not mentioned in the sale deed that the payment made by the assessee was to the extent of Rs.13,97,630/- only. Rather, in the sale deed the entire payment of Rs.52,74,000/- was acknowledged to be received in cash. Under the circumstances, the contention of the assessee that he had only 25% ownership in the property was rightly rejected by the Revenue. In the absence of individual share of the two co- buyers being not mentioned in the sale deed, the shareholding of the co-owners in the property had to be considered in equal proportion. The AO had, therefore, rightly added the balance unexplained investment of Rs.12,39,370/- on the part of the assessee. The addition as upheld by the Ld. CIT(A) is, therefore, confirmed. The ground taken by the assessee is dismissed.

The next ground pertains to disallowance of loss of Rs.12,04,869/- claimed u/s.57 of the Act. In the course of assessment, no details in respect of loan taken, the name and address to the parties to whom interest payment was made etc. was furnished. Therefore, the AO had disallowed the deduction as claimed by the assessee.

1 The Ld. AR for the assessee explained that the loan was taken for the purpose of making investment in the partnership firm M/s. Rudra Construction. He submitted that if the deduction was not admissible under the head ‘income from other source’, it ITA No. 530/Ahd/2024 [Dushyantsingh Y Chudasama vs. ITO] A.Y. 2010-11 - 8 –

2 Per contra, Ld. Sr. DR submitted that the assessee had not established the nexus of the interest payment claimed as deduction by the assessee with the interest income by the assessee. Therefore, the AO had rightly disallowed the loss on account of interest payment claimed as deduction u/s.57 of the Act.

3 We have carefully considered the rival submissions. The AO had made the disallowance for the reason that the details of loan taken and the interest payment thereon were not filed. On the other hand, the assessee has contended that the loans were taken from family members and details thereof was filed. The other contention of the assessee is that the interest payment was in respect of loans, which were ultimately advanced to M/s. Rudra Construction and on which interest income was also earned by the assessee. This aspect was not examined by the AO in the course of assessment. We, therefore, deem it proper to set aside the matter to the file of the Juri ictional AO to verify the nexus between the interest expenditure of Rs.12,07,500/- and the interest income of Rs.9,07,086/- earned from partnership firm M/s. Rudra Construction. In case, the assessee is able to establish this nexus, the deduction in respect of interest payment may be proportionately allowed to the assessee. At the same time, the assessee is also directed to file the confirmation for the loans

In the result, the appeal of the assessee is partly allowed for statistical purposes.